1. You have just won the $50 million state lottery jackpot. You may take it as one lump sum or as 20 annual payments of $2.5 million. In the second situation, assume the discount rate is 7%. Write a summary paragraph detailing which way you want to receive the money and why, including the mathematical calculation for the present value of the $50 million taken in 20 annual payments.
2. You are a NBA basketball player. It is time for you to sign your next contract. You can choose from two options how you would like to receive your money. Option one: an immediate payment of $10 million. Option two: you will receive $5 million immediately, $2 million at end of year one, $2 million at end of year two, $1.5 million at end of year three, and $1.5 million at end of year four. Write a summary paragraph detailing which way you want to receive the money and why, including the mathematical calculation for the present value of the second option. In the second situation, assume the discount rate is 5%.
3. You are a NFL football player. It is time for you to sign your next contract. You can choose from two options how you would like to receive your money. Option one: an immediate payment of $10 million. Option two: you will receive $1 million immediately, $2 million at end of year one, $3 million at end of year two, $4 million at end of year three, and $5 million at end of year four. Write a summary paragraph detailing which way you want to receive the money and why, including the mathematical calculation for the present value of the second option. In the second situation, assume the discount rate is 5%.
4. You are a MLB player. It is time for you to sign your next contract. You can choose from two options how you would like to receive your money. Option one: an immediate payment of $5million, $1 million at end of year one, $2 million at end of year two, $3 million at end of year three, and $4 million at end of year four. Option two: an immediate payment of $5 million, $4 million at end of year one, $2 million at end of year two, $1 million at end of year three, and $1 million at end of year four. Write a summary paragraph detailing which way you want to receive the money and why, including the mathematical calculation for the present value of the second option. In the second situation, assume the discount rate is 5%.